Earnings Inequality Between Black and White Men in the Private Sector Greatest at the Top

Washington, DC--At the beginning of the 1990s, black men working in the most highly paid private sector jobs earned 20 percent less than similar white workers, a racial disparity far greater than in lower paid jobs, according to a recent study by Eric Grodsky and Devah Pager, University of Wisconsin-Madison.

“The Structure of Disadvantage: Individual and Occupational Determinants of the Black-White Wage Gap,” published in the August issue of the American Sociological Association's American Sociological Review, found that while on average black men earned nine percent less than otherwise similar white men in the private sector, the percentage difference in earnings between blacks and whites was smallest in the lowest-paid occupations and greatest in the highest-paid occupations. For men working in the public sector, on the other hand, the average difference in earnings between blacks and whites in the same occupation was only 5 percent. The size of this gap did not vary consistently across occupations in the public sector.

“This should be a wake up call for those who believe that increases in occupational mobility will automatically lead to racial earnings equality,” the authors note. “Black men have made inroads into the most highly paid occupations, but once they get there they find they still don't earn as much as equally qualified white men.”

Private-sector jobs in which black men held the greatest disadvantage included insurance sales, securities and financial services sales, actuaries, lawyers, and physicians. Grodsky and Pager believe that occupations with large racial earnings disparities tend to be those that rely on the wealth of clients for their success. Differences in earnings for such occupations may come about due to commissions on the value of property or other assets sold, or through disparities in fees charged for services. Because the social networks of blacks and whites are fairly segregated and blacks on average have less wealth than whites, black professionals and sales representatives have less access to the lucrative customer base necessary to boost their earnings.

The earnings disparities in these occupations might also arise if employers assign their black employees to serve minority communities. For example, if black real estate agents are disproportionately assigned to black clients and black neighborhoods, their sales commissions will be significantly lower than their white coworkers' because property values in black neighborhoods are generally lower than those in white neighborhoods. Evidence of this type of employee channeling has been found in other studies and is the basis of a recent claim made by African-American sales-workers at the Xerox Corporation (Frank Warren et al. vs. Xerox).

Reinforcing this explanation for the racial gap in the earnings, Grodsky and Pager also found that private-sector occupations with the smallest racial disparities are often those in which salary depends little on the type of clients served. Upholsterers, bus drivers, hotel clerks, and woodworking machine operators, for example, are occupations with smaller racial differences in pay. In these occupations, wage rates are set on the basis of production or experience rather than the demand for service from a particular clientele.

Grodsky and Pager's findings are based on 1990 census data, which is the most recent data available with a sample size adequate for evaluating racial earnings inequalities at the level of detail required. They adjusted for differences among men in educational attainment, in experience, and in geographic region. They also adjusted for differences in the skill demands of occupations, finding no relationship between the level of cognitive or interpersonal skills required by an occupation and the extent of its racial earnings gap.

To acquire a copy of the August 2001 issue of the American Sociological Review or the article, members of the media should contact the American Sociological Association's Public Information Office at (202) 383-9005 x320; pubinfo@asanet.org.

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